Accounting 3

1. Accounting 3 Chapter 18 Section 1

2. Vocabulary • Corporation- An organization with the legal rights of a person and which may be owned by many persons. • Share of Stock- Each unit of ownership in a corporation. • Capital Stock- Total shares of ownership in a corporation. • Special Journal- A journal used to record only one kind of transaction.

3. Differences Between Ownerships • The main difference among the accounting records of proprietorships, partnerships, and corporations is in the capital accounts. • Proprietorships and partnerships have a single capital and drawing account for each owner. • Corporations have separate capital accounts for the stock issued and the earnings kept in the business.

4. Special Journals • A General Journal is used in a corporation. • Four types of special journals are used in corporations: • Purchases (discussed in this section) • Cash Payments • Sales • Cash Receipts

5. Purchases Journal • This journal is used only to record purchases of merchandise on account. • A purchase on account can be recorded on one line. • There is only one special amount column. • Each entry in this column is both a debit to Purchases and a credit to Accounts Payable. (This is just combining the same two columns from the expanded journal used in Accounting 2.)

6. Purchases Journal • Instead of a Doc. No. column, a Purch. No. column is used. This is due to purchase invoices as the only source document in this journal. • Instead of an Account Title column, an Account Credited column is used. This is done because you must specify which company the merchandise was purchased from and credit that account in the accounts payable ledger.

7. Purchases Journal Page ___ Purch. No. Post Ref. Purchases Dr. Acct Pay Cr. Date Account Credited Example of Purchases Journal

8. Purchases Accounts Payable 7,254.00 7,254.00 Pro Golf Company 7,254.00 Journalizing Purchases on Account • Example Transaction: March 2. Purchased merchandise on account from Pro Golf Company, $7,254.00. Purchase Invoice No. 179. • Accounts Effected: • Visual steps for completion on next slide. General Ledger Accounts Payable Ledger

9. Purchases Journal Page ___ Purch. No. Post Ref. Purchases Dr. Acct Pay Cr. Date Account Credited Journalizing Purchases on Account 3 Mar 2 Pro Golf Company 179 7 2 4 5 00

10. Posting from Purchases Journal to Accounts Payable Ledger • The amount on each line of a purchases journal is posted as a credit to the vendor account in the accounts payable ledger. • The posting reference used for the purchases journal is P along with the page number of the transaction. (P3 for this one) • Once posting is done, posting references must be entered on the purchases journal page. • Visual steps on next slide.

11. Account Acct No. Post Ref Credit Balance Date Item Debit Credit Posting from a Purchases Journal to an Accounts Payable Ledger Pro Golf Company 260 Mar 1 Balance 3 6 8 1 00 2 P3 7 2 5 4 00 10 9 2 6 00

12. Posting from Purchases Journal to a General Ledger • At the end of the fiscal period, the purchases journal must be ruled and totaled. • Once this is done, the total must be posted in the General Ledger in both the Purchases and Accounts Payable accounts. • Visual steps on next two slides.

13. Purchases Journal Page ___ Purch. No. Post Ref. Purchases Dr. Acct Pay Cr. Date Account Credited 3 Mar 2 Pro Golf Company 179 7 2 5 4 00 260 31 Raffo Company 180 270 3 7 1 0 00 31 Total 10 9 6 4 00 (5105) (2115) *These should be entered after totals have been posted into the general ledger.

14. Account Account Acct No. Acct No. Post Ref Post Ref Date Date Item Item Debit Debit Credit Credit BALANCE BALANCE DEBIT DEBIT CREDIT CREDIT Accounts Payable 2115 Mar 1 Balance 23 8 8 7 00 1 2 0 00 24 0 0 7 00 29 G4 31 P3 10 9 6 4 00 34 9 7 1 00 Purchases 5105 Mar 1 Balances 72 3 7 4 00 16 CP6 2 4 0 00 72 6 1 4 00 31 P3 10 9 6 4 00 83 5 7 8 00

15. Look at postings after each step is complete and use the back button to get to the next step. Once finished, this is the end of section 1. Purchases Journal Page ___ Purch. No. Post Ref. Purchases Dr. Acct Pay Cr. Date Account Credited Work Together p. 459 4 Apr 2 Farris, Inc. 45 220 1 7 0 0 00 Post 5 Delta Manufacturing 46 210 3 2 6 5 00 Post 8 Williams Company 47 230 7 8 0 00 Post 30 Total 5 7 4 5 00 Post (2115) (5105) Assignment *These should be entered after the totals have been posted. *These should be entered after the credit to vendor account has been posted.

16. Account Acct No. Post Ref Credit Balance Date Item Debit Credit Delta Manufacturing 210 Apr 1 Balance 2 2 4 5 00 5 P4 3 2 6 5 00 5 5 1 0 00

17. Account Acct No. Post Ref Credit Balance Date Item Debit Credit Farris, Inc. 220 Apr 1 Balance 1 2 5 7 00 2 P4 1 7 0 0 00 2 9 5 7 00

18. Account Acct No. Post Ref Credit Balance Date Item Debit Credit Williams Company 230 Apr 8 P4 7 8 0 00 7 8 0 00

19. Account Account Acct No. Acct No. Post Ref Post Ref Date Date Item Item Debit Debit Credit Credit BALANCE BALANCE DEBIT DEBIT CREDIT CREDIT Accounts Payable 2115 Apr 1 Balance 8 7 6 0 00 30 P4 5 7 4 5 00 14 5 0 5 00 Purchases 5105 Apr 1 Balance 18 7 8 1 00 30 P4 5 7 4 5 00 24 5 2 6 00

20. Assignment • Do Application 18-1 on page 477 by hand. • Turn it in to Mrs. Middleton. • Move on to section 18-2.